MLB: Curly Dollar Signs in Washington

 

The Washington Nationals’ curly W is beginning to look a lot more like a dollar sign now that the club has been valued at over one billion dollars. In a recent report by Forbes, this baseball franchise is worth a cool $1.28 billion; ranking them ninth in Major League Baseball

The Nats have taken Washington D.C. by storm in their upstart years. Through homegrown talent and a strong front office strategy, they have established themselves as one of the premier clubs in Major League Baseball. In just one year —from 2014-2015 — the Nationals have seen their value increase by 83%, while the average club grew 48% in the same time period.

In 2014, MLB generated $7.86 billion dollars in revenue. Of that amount, broadcast and cable money accounted for 37% or $2.88 billion. The value of television rights has been on the increase as media becomes more accessible to fans across the globe. In 2009 (just five years earlier than last year’s numbers) baseball brought in $5.91 billion dollars in revenue and the television money accounted for 29% of that or $1.73 billion.

Television revenue is the key driving factor behind these robust valuations. The only franchise to best the Nationals’ growth has been the World Series Champion San Francisco Giants who have generated a 100% increase over a year’s time.

MLB teams are raking in television money and several mega TV contracts have been taking effect in recent seasons. The Los Angeles Dodgers, Seattle Mariners and Los Angeles Angels have all begun their time under their new television deals. Along with these individual team deals, Major League Baseball has doubled their television rights through deals with ESPN, Fox, and TBS who will pay double the previous amounts over an eight year span. The new deals for Major League Baseball are paying out a total of $12.4 billion.

The Texas Rangers are set to begin their new 20-year contract worth $3 billion this season. While the Philadelphia Phillies and Arizona Diamondbacks are both starting 20+ year TV deals worth $5 billion and a reported $1.5 billion respectively.

When self-made real estate mogul and principal Nationals owner Ted Lerner took over the team from the Expos Baseball Group in 2006, the price tag was $450 million. This was certainly a well-timed investment as the growth of the team has doubled and then some since it sold for less than half a million.

In 2014 the Nationals were valued at $700 million and saw their second -lowest operating income in the club’s lifespan at $22.4 million. With all of these TV deals bringing in significant revenue to ball clubs, it is only fitting that the Nationals have a significant deal in place as well, right?

Wrong.

Washington is currently a joint owner of MASN along with fellow DMV club, the Baltimore Orioles, but Baltimore holds a significantly higher stake in the company (87% in favor of the Orioles). This has led to significant tension and even a set of court hearings to determine what the Nationals should be paid for their television rights. As it stands now, the Nats are bringing in under $100 million dollars through their television contract.

Washington faces a significant disadvantage moving forward if no success can be found in striking a new deal. Playing in one of baseball’s 15 largest markets renders the team ineligible for revenue-sharing by 2016 as the current collective bargaining agreement stipulates.

Moving forward, television money is becoming more and more critical to the Nationals’ long term future. With several high-priced free agents set to hit the market in the next two years, television money will go a long way to covering luxury tax fees if the Nats hope to re-sign the likes of left fielder Bryce Harper and pitcher Jordan Zimmermann. Currently the numbers indicate that that Nationals are about $30 million underneath the Luxury tax line, but with such high profile contracts set to expire in the near future, that $30 million bumper will disappear more quickly than anyone in Washington would like.